MSNBC – Talking LTE along with the CTOs of the top 4 US operators

CNBC – Talked to Jon Fortt about Family Data Plans – They are coming

The Grand Slam of electronic gadgets brought back the faithful to the sin city of Las Vegas to indulge in the future of electronics, gadgets, and consumer behavior. This note summarizes my observations from the CES show.

Pass the baton – CES is turning into a wireless show. With Microsoft no longer leading the keynotes in future editions, my vote will be for Qualcomm’s Paul Jacobs who gave a fun and eloquent keynote himself to occupy the opening keynote next year.

Connected Everything – Our theme for last year’s Mobile Future Forward was “Connected Universe, Unlimited Opportunities.” It was one of the central themes of this year’s CES (and is likely to be for many more years). From health monitors to Sony Vita, from treadmills to autos, connectivity is driving new features, behavior, and hopefully consumer demand.

Gesturize Everything – Touch is for oldies, gesture (wave and voice) is driving the new interactions. If you thought talking to machines was weird, well! get used to it. Starting with TVs, autos, gaming devices, and PCs, gesture based computing is invading the internals of electronic devices everywhere.

Microsoft/Nokia resurgence? – Nokia’s Elop was everywhere to help introduce the windows devices in North America. AT&T could do to Windows devices what Verizon did to Android – give it a boost that is. While the OS is fresh and elegant, the consumer interest has been tepid. Though there are a number of things that could go wrong with pricing, execution, and marketing, at least they have some operator allies in the North American market this time around.

1K is so yesterday, 4K/8K is in – TV manufacturers touted higher resolution 4k/8k displays. Never mind the content in new formats won’t be available for months. However, the displays are getting sharper with exquisite clarity. It is a great time to be a consumer.

Live Mobile TV, No it is not dead yet – I have been a believer in broadcast mobile video. Dyle could succeed where Mediaflo failed; it just needs to get the top tier operators behind the endeavor.

Waterproof is the new black – It seemed like the OEMs have been reading from research that consumers are not aware off. They either expect us to start using the tablets and phones in shower or start colonizing oceans in search of greener pastures. Almost all OEMs had their devices in “hold-your-nose-and-dip-in-water” mode.

Chinese are coming – Pretty soon “Made in China” will also mean conceptualized and designed in China. The Japanese and Korean gizmo manufacturers should be bracing for a tough slug in the months ahead. Chinese brands are starting to make an impact on the show floor, often a precursor to the impression on the global marketplace.

You say MacBook Air Imitators, I say Ultrabooks – Intel and partners were out in full force to demonstrate that sleek designs can go hand-in-hand with windows as well. It is not a substantially new category, will just eat the share from notebooks.

Intel’s entry into smartphones – Will they, won’t they? The question of when will Intel be a player in the mobile space has been out there for a while. Intel’s partnership with Motorola + the OS partnership with Samsung is its attempt to alter the mobile ecosystem. While our Predictions Panel gave man finding water on Mars a higher probability than a new mobile ecosystem emerging, Intel might be one to watch.

3D Printers – Having a birthday party, no problem! Something new and cool, now you can print kids’ toys right from your desk. It will set you back $1300 but you will be the geekiest dad on the block.

Phablets – Getting tired of phones? tablets? How about Phablets with your morning tea sir? Samsung’s Note is trying to convince customers that hybrid is all they need for making phone calls or drawing a portrait for an art gallery. OEMs are launching devices for every inch in the range of 4” to 12” and see what sticks.

Tablet Bloodbath – There were so many tablet launches at CES that it is hard to keep track of them. One thing most of them had in common – no pricing, no launch dates which is generally a precursor to their trip to the graveyard of electronics.

Home Energy Networking – If your home lights are starting to flicker without any sane reason, there is a good chance that someone has gotten a hold of your WiFi router which controls your house’s electric outlets via adaptors that are about to flood the market. Other devices for the home like kitchen tablets etc. have also started pouring in.

AT&T Developer Summit – The mobile developer summit was very well executed, full with announcements (how about free unlimited API access for one year), buzz, and gravitas. Google would have been proud.

The ghost of Apple – As usual, the ghost’s presence was felt at the show (including some execs in human flesh).

Coolest demo – For me it was Samsung’s transparent window. Gives a new meaning to window shopping.

Coolest toy – My vote goes to Parrot’s AR.Drone. Will set you back $300 but will make you the neighborhood ninja. What was missing was a drone that can carry humans so they don’t have to walk 50,000 CES miles in one day.

Coolest booth – Auto industry can teach a thing or two about stacking up the booths. Audi with its blindingly fluorescent lights and futuristic concept cars was quite impressive with Mercedes Benz a close second. LG with its massive 3D TV wall was also quite impressive.

CES Star of the Show – Samsung with its omnipresence dominating virtually every important CE category has to be the most dominating player in the industry. Of course, Apple gives its Korean counterpart run for its money but Samsung made its presence felt with a slew of devices, future vision, and an integrated view of the world.

Your feedback is always welcome.

Thanks

Chetan

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2012. The next Global Wireless Data Market update will be issued in Apr 2012.

Disclaimer: Some of the companies mentioned in this paper are our clients.

2012 Mobile Industry Predictions Survey

http://www.chetansharma.com/MobilePredictions2012.htm

Download PDF

First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2012. My thanks to all who participated in our 2012 Mobile Predictions Annual Survey. It gives our community an insider’s view of trends.

2011 was a terrific year for the mobile industry. With all its ups and down, consumers embraced devices, applications, services, and technology with more gusto than ever before. In the waning hours of 2011, we crossed the 6 billion subscriptions milestone. While the first billion took 19 years, this last billion only took 15 months.

Smartphones are selling like hot cakes. We estimate that by the end of Q4 2011, over 60% of the devices sold in the US were smartphones and over 30% of the global sales were for the evolved brethren of the primordial featurephones. Sparked by insatiable consumer demand for mobile data, LTE and HSPA+ networks are sprouting all over the planet with US leading the charge for broadband deployment.

Our annual survey is a way for us to engage our community on the trends for the next year. We put some of the pressing questions to our colleagues and industry leaders. We are able to glean some valuable insights from their choices and comments, some tangible shifts, and get a sense of what’s to come. Executives, developers, and insiders (n=150) from leading mobile companies and startups from across the value chain and around the world participated to help see what 2012 might bring to keep us on our toes. What makes this survey unique is that it draws upon the collective wisdom of folks who are at the center of the mobile evolution.

Fifteen names were randomly drawn for the limited edition of the Mobile Future Forward 2011 book. The winners are:

1. Tor Bjorn Minde, Head of Ericsson Labs, Ericsson

2. Sunder Somasundaram, Industry Solutions Practice Director, AT&T

3. C. Enrique Ortiz, Mobile Technologist, About Mobility

4. Russell Buckley, CMO, Eagle Eye

5. Marianne Marck, VP – Engineering, Starbucks

6. John Foster, President, ZED USA

7. Angel Luis Saez, Sr. Director, Orange Spain

8. Dilip Mistry, Senior Director, Microsoft Asia

9. Phyllis Reuther, Advanced Analytics Lab, Sprint

10. Gene Keenan, VP of Mobile, Isobar

11. Elizabeth Day, Director of Finance, Trilogy International

12. Alan Cole, Research Staff Member, IBM T.J. Watson Research Center

13. X J Wang, VP – GM China, Vesta Corp

14. Michelle Lee, Director, SK Telecom

15. Hemant Chandak, Sr. Analyst, Cisco Systems

Thanks again to everyone who contributed. We will be calling on you again next year. It has been a terrific year for us at Chetan Sharma Consulting and we are looking forward to an engaging and productive 2012.

Be well, do good work, and stay in touch.

Thanks and with warm wishes,

Your feedback is always welcome.

Thanks

Chetan Sharma

Now onto the 2012 Mobile Industry Predictions Survey Results.

1. What was most newsworthy in Mobile 2011?

Android had a spectacular rise in 2011 around the globe. Android OEMs collectively shipped the most number of devices and while margins shrank, they were able to put a united front to iOS. 2011 will always be remembered for the passing away of the industry transformer Steve Jobs. His work directly or indirectly touched billions of souls around the planet, many times over – something rarest of human beings are able to achieve in their life time. Regulatory tussles and significant increase in IP disputes also occupied the headlines. Amazon announced its intention for the mobile space with the launch of Kindle Fire.

2. What will be the biggest mobile stories of 2012?

As we look towards 2012, our panel voted for the continued growth of mobile data as the biggest story followed by Amazon’s entry into the mobile space. Some key questions for the year are: Will Microsoft/Nokia devices will make any meaningful progress? Will RIM survive the year? How does Google manage the fragmentation, decline in margins (for the OEMs), and the IP issues? Will any high-profile security and privacy mishaps lead to more regulatory entanglements? Facebook IPO and its mobile ambitions? How do operators manage the data demand? Which M&As will capture industry’s attention? Will Apple continue to dominate on both smartphone and tablet front? What does Apple do with mobile payments? and much more. Clearly, it is going to be a terrific year.

3. Who will be the most open player in the mobile ecosystem in 2012?

File this in the “perception is reality” folder. Despite all the criticism, Google has maintained its strong position as the most open player in the mobile industry.

4. What applications will define 4G?

Still looking for a killer-4G app? Video, cloud computing, and access will continue to drive 4G demand and growth.

5. What will be the breakthrough category in mobile in 2012?

For a second year in a row, the panel voted for mobile payments and mobile commerce as the top two category that will find their voice. Mobile advertising has become mainstream so it lost its ranking in the top 3.

6. What will be the most popular consumer mobile applications in 2012?

Apps preferences vary by regions depending on a whole range of factors. Messaging and Commerce are the top two categories for the developing world while consumers in the developed nations are likely to gravitate towards commerce and location based services.

7. Which will be the most dominant (unit sales) tablet platform in 2 years?

iOS and Android will dominate the tablet landscape for the next 24 months. A late entry by Windows 8 tablets could make a dent but don’t count on it.

8. Who will make the biggest mobile acquisition in 2012?

2011 had its fair share of block-buster acquisitions, some successful while others were not. Our panel expects Microsoft and Google to continue making the biggest acquisitions.

9. How will the "Apps vs. Mobile Web" debate shape up in 2012?

It seems like the pendulum is swinging towards the mobile web though hybrid solutions are likely to stay with us for a long time.

10. Who will define the mobile payment/commerce space?

The financial companies safely locked in the mobile payments space and while the value chain is fairly complicated and definition confusion abounds, the likes of Visa, Operators and Google will continue to drive the payments/commerce space.

11. Which solutions will gain the most traction for managing mobile data broadband consumption?

Managing data growth and margins drives all strategies at mobile operators these days which in turns drives the value chain. 4G, tiered pricing, and mobile offload continue to be the top solutions if one has the spectrum that is.

12. Which category will generate the most mobile data revenue in 2012?

Messaging, access, apps, and advertising are the four broad categories that drive mobile data revenues around the world. The developing markets rely on messaging while the developed markets are increasingly looking to access as their dominant form of revenue generation.

13. What will help mobile cloud computing gain traction in 2012?

Mobile cloud computing will continue to be defined by enterprise, storage, and media needs.

14. Which enterprise segment will mobile impact the most?

Best buy is becoming the next Circuit City. Other retailers will follow unless they can successful reinvent themselves. Health is more regulatory driven so the progress will be slow though it is ripe for a complete overhaul and developing nations are moving much faster in this space.

15. What will be the dominant revenue model for apps in 2012?

In-app revenue model made good strides in 2011 but the combination of the various available revenue models will be the norm for most application developers.

16. What mode of mobile payments will get traction in North America and Western Europe in 2012?

2011 was the year to set the ground work for growth in the mobile payments space. Given the investment and focus, we are likely to see more movement and consumer involvement in 2012 with proximity based solutions and commerce of physical goods on mobile.

17. What will be the most successful non-mobile-phone category in 2012?

Tablets dominate. Period.

18. Which of the following are likely to happen in the near future?

The is a significant shift in computing taking place right in front of our eyes wherein tablets are replacing laptops and even desktops in the enterprise. European operators have been experiencing tough times while some of the Asian operators are flush with cash, they might make their move in 2012 though regulatory hurdles might prove to be an issue. 33% of the nations will have elections in 2012, maybe which will move mobile voting to the forefront in some nations. Our panel thought there is a better chance of humans discovering water on another planet than rise of another significant mobile OS.

19. Which areas will feel the most impact from Regulators in 2012?

Net-neutrality and market competitiveness will keep the regulators busy in 2012.

20. Who was the mobile person of the year?

Clearly, Steve Jobs was an easy choice but who will replace him 2012? Jeff Bezos has an early lead followed by Andy Rubin and Mark Zuckerberg. Angry Birds representing the developer community will be in for another terrific year. Other honorable mentions were Tim Cook, Paul Jacobs, Sanjiv Ahuja, Dan Hesse, and Glenn Lurie.

A lot to look forward to in the New Year. My thanks to all who participated and we hope you found it useful as you embark on your journey for a successful 2012.

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2012. The next Global Wireless Data Market update will be issued in Apr 2012.

Disclaimer: Some of the companies mentioned in this survey are our clients.

2011 has been a fascinating year – with all the mergers, sky rocketing data growth especially in the US market. 2011 will also be remembered for the passing away of Steve Jobs, the man who helped change the global mobile industry over the course of the last four years. Locally, lots happening – Microsoft/Nokia alliance is launching new devices, Amazon has entered the mobile space with both feet, mobile gaming remains hot, and on a broader scale, we are going through the process of mobilification of everything.

Mark Anderson, CEO of Strategic News Service. I have known Mark for over 15 years now as one of the early subscribers to his wonderful newsletter. My good friend and coauthor Joe Herzog introduce me to Mark and since then I have been influenced by his writing. If you follow my blog, the name AORTA or Always On Real Time Access was coined by Mark in the late nineties and he generously allowed me to use it. Mark has also been writing about the carry-along-PC aka tablets for sometime and won the bet with bet with Michael Dell on the growth of this sector. He just finished off his annual predictions for 2012, so we had a lot to talk about.

Laura Marriott is CEO of Neomedia which is doing some pioneering work in the mobile barcode/mobile marketing space. But she is more famous for her work at the Mobile Marketing Association where she helped grow the industry and the association to make it a thriving enterprise.

Satya Mallya is Director at Orange. For those of you don’t know Orange is one of the top European Operators but he is based in the silicon valley working on some cool projects. He has been in the telecom space for almost 20 years working at Bell Labs, Octel and two startups

Brian Fling is CEO of pinchZoom a mobile agency that helps big brands like BBC, Paypal, Delta and others understand mobile design and development. He is passionate about mobile user experience, has spoken and written extensively about the subject.

Jay Emmet is GM OpenMarket, SVP, Amdocs and knows the messaging, commerce space on the back of his hand. Very successful stints at mblox, ATG and others. Knows the operator world really well and has been straddling both the on-deck/off-deck world for a long time.

We touched on a range of subjects from IP to platforms, from privacy/security to mobile commerce and payments, from Microsoft to Amazon .. and so on and so forth. Below is the summary of the discussion:

• While the economy in various regions has been shambles, the tech industry has been largely protected, especially, the mobile industry. We are lucky to be working in space. Amen!
• As far as the mobile platforms are concerned, there are only two that matter – iOS and Android with iOS still having a strong upper hand. Android is plagued with IP issues and OEMs are starting to have second thoughts about the cost and risks of supporting Android in the long-term. All this is of course very fluid and will depend on the outcome of a number of IP cases in courts.
• Microsoft has made some progress with Nokia but as recent shuffling indicates, all is not good and there is going to be considerable work needed in the coming days to get alliance working in sync and work a thriving ecosystem long-term.
• Siri has just changed the game at some many levels. Consumers now expect more from their devices and players are scrambling to deliver.
• This year began with the debate of apps vs. mobile web. Mobile Apps have fundamentally changed the mobile UI and design paradigm. Consumers don’t want to just browse a page on their devices, they want great user experiences all of which can’t be delivered on mobile web. Apps stay quite a bit ahead of the game.
• There is systematic IP theft and cyberattacks going on and western nations and companies are finally waking up to do something substantial. However, it is going to be a long journey to get it right.
• Many small companies have built good, attractive IP portfolios in mobile and given the investment and invention, they should be allowed to maximize the value of their IP.
• Amazon’s entry has changed the game. It has already become the number two in tablets and more to come. It will impact retail, advertising, and many other segments of the consumer economy.
• Over the last 20 years, capacity has been an issue every year but this time around, the capacity constraints are significant. While the services and consumption have gotten much better in orders of magnitude, the prices have largely stayed the same. To build capital-intensive networks, operators will have to find ways to increase data revenues.
• Operator channel is still a viable channel for the developers especially the ones who are looking for broader international reach.
• Mobile Security on smartphones remains a worrying concern and is an opportunity area for entrepreneurs.
• Mobile Privacy is a complicated issue. Many businesses are actually based on exploiting the privacy not protecting it so the business models are at odds with the privacy mantra and regulations. Something has to give. More regulations to come.
• QR codes and NFC will live in harmony for sometime.
• There are currently no clear winners in the mobile payments space. It is likely to stay very fragmented and is likely to become even more so over the coming days before any leaders emerge. Payments remains the most complicated ecosystem with many players involved and success stories will depend on the use-case scenarios.
• Cloud offers a differentiating opportunity for the operators and compete effectively with some of the OTT players.
• Many industry verticals are getting transformed by mobile. Big brands are aggressively pursuing mobile as a key strategic project. Health, Retail – opportunities abound.
• While traditional messaging is getting impacted by IP messaging, the decline is not universal and operators are reacting with new business models and technology initiatives.
• 2012 will be another great year for mobile. Fasten your seat belts.

It was a joy to moderate this terrific panel that kept audience glued to their seats till the very end. Thanks all for coming. We have some terrific events planned for 2012, Stay Tuned.

Until then, Wish you and yours a very happy and stress-free holiday season and enormously successful and prosperous 2012.

And don’t forget to fill out our Annual Mobile Predictions Survey for 2012. There are prizes for 10 lucky winners.

ps. As I mentioned in the opening, WA state dept has a wonderful program to help startup with their travel to Mobile World Congress in Barcelona next year. Details here. Startups should check it out.

Let us know what you think and enter to win the limited edition exclusive Mobile Future Forward Book for 2011.

We will be delighted to hear from you. Here is the link.

The questions are:

1. What was most newsworthy in Mobile 2011?

2. What will be the biggest mobile stories of 2012?

3. Who will be the most open player in the mobile ecosystem in 2012?

4. What applications will define 4G?

5. What will be the breakthrough category in mobile in 2012?

6. What will be the most popular consumer mobile applications in 2012?

7. Which will be the most dominant (unit sales) tablet platform in 2 years?

8. Who will make the biggest mobile acquisition in 2012?

9. How will the "Apps vs. Mobile Web" debate shape up in 2012?

10. Who will define the mobile payment/commerce space?

11. Which solutions will gain the most traction for managing mobile data broadband consumption?

12. Which category will generate the most mobile data revenue in 2012?

13. What will help mobile cloud computing gain traction in 2012?

14. Which enterprise segment will mobile impact the most?

15. What will be the dominant revenue model for apps in 2012?

16. What mode of mobile payments will get traction in North America and Western Europe in 2012?

17. What will be the most successful non-mobile-phone category in 2012?

18. Which of the following are likely to happen in the near future?

19. Which areas will feel the most impact from Regulators in 2012?

20. Who was the mobile person of the year?

Thanks. We will be back with results during the first week of Jan 2012. Until then, best wishes for a great holiday season and a terrific new year.

http://www.chetansharma.com/usmobileupdateQ32011.htm

Download PDF

Summary

The US mobile market continued its blistering pace of growth and ecosystem restructuring. While China and India lay claim to the fastest growing markets on the planet, the many of the meaningful and impactful trends are originating out of the US market with software at the epicenter of creation, growth, change, evolution, and destruction.

The US wireless data market grew 5% Q/Q and 21% Y/Y to reach $17B in mobile data service revenues in Q3 2011 and is on course to increase Y/Y by 22% to $67B in 2011.

As predicted, Samsung overtook Apple as the leading smartphone OEM. However, Apple will continue to dominate profit share for the foreseeable future.

Smartphones continued to be sold at a brisk pace accounting for 57% of the devices sold in Q3 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare. The featurephone as a device species is on the verge of extinction.

Mobile Ecosystem Complexity

As expected, Amazon entered the mobile tablet space with a killer value proposition - $200 for a tablet, something the market sorely needed. While other OEMs tried to compete with Apple on performance (and have been retreating from the market one by one), Amazon is entering the battle on its own turf – a hardware platform built on Android with a slew of services to underwrite the device discount. Incumbent OEMs just can’t compete with that strategy without a complete rethink of their product strategy. What happens when Amazon’s strategy migrates to handsets? While Kindle Fire is not a serious threat to Apple iPad, and the current version has a lot of deficiencies, Amazon has carved out a nice market for itself that will continue to grow in the coming days. In some sense, with its tight integration of commerce, cloud, and advertising, it has out-maneuvered even Google.

Amazon’s impact will be felt by many others in 2012 as its strategy becomes more apparent. Retailers will be facing the brunt of the wave that Amazon represents i.e. etailers supplanting physical retailers. Don’t be surprised if Amazon purses Apple like stores to showcase its merchandize and puts a dagger at the heart of retail.

Google has done a masterful job of shepherding Android through the turbulent platform waters and make it the dominant mobile platform in terms of shipments.

Microsoft and Nokia finally introduced the Windows devices and it has at least given them a fighting chance in 2012, though a far more competitive offering would be needed to make any significant market share or revenue share inroads. Microsoft’s Xbox/Kinect integration remains its best card for 2012.

In a severe case of corporate schizophrenia, HP first launched webOS devices, then backed away, then thought of re-launching only to give it away to open source. Similarly, RIM faces critical test in 2012 and all its hopes are pinned on the new OS that is expected to come to the market sometime next year.

Mobile is changing the way we spend

It is very clear that mobile will be at the center of the human evolution for years to come. Mobile collapses time and distance and as such impacts every facet of our lives. While we have come to know the mobile phone as a communications device, their role in our daily lives has been expanding. From checking emails, paying for tickets, sending money transfers, taking pictures of your kids, watching soccer World Cup live, checking commodity pricing, to emergency response to mHealth (mobile Health), mobile devices have become an essential tool to help us navigate our day.

Mobile also plays a key role in how we go about the most basic transaction in a given day that keeps the economy humming – spend. We discussed this and more in the paper “How Mobile Will Change The Way We Spend”  that was released last quarter.

What to expect in the coming months?

All this has setup an absolutely fascinating 2012 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems.

As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.

Against this backdrop, the analysis of the Q3 2011 US wireless data market is:

Service Revenues

• The US Wireless data service revenues grew 5% Q/Q and 21% Y/Y to $17B in Q3 2011. The mobile data services revenues for the US market are on track to reach $67B in 2011.
• Verizon and AT&T had a good mobile data quarter accounting for 62% of the increase in data revenues in Q3 2011.
• For the quarter, AT&T and Verizon accounted for 69% of the market data services revenues and 62% of the subscription base.
• Verizon maintained its #1 ranking again just edging past NTT DoCoMo who came in at number two with $5.95B in data revenues for the quarter. AT&T maintained its #3 position with $5.6B in data revenues. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for Q3 2011.

ARPU

• The Overall ARPU increased by $0.31. Average voice ARPU declined by $0.49 while the average data ARPU grew by $0.80 or 4% Q/Q.
• The average industry percentage contribution of data to overall ARPU was 37.6% in Q3 2011 and is likely to exceed 40% by Q1 2012. As expected, Verizon became the first US operator to eclipse the 40% mark with AT&T and Sprint close behind. (for reference, all three major Japanese operators are now above the 50% mark).
• The top three operators were neck-and-neck in data ARPU each recording a 39%+ performance. T-Mobile ended the quarter exceeding the 30% mark for the first time.
• We expect data revenues to exceed voice revenues in the US market in early 2013.

Subscribers

• Helped by the growth in connected devices, the overall net-adds increased by 4.9M with Verizon accounting for almost 50% of the growth.
• For the eight straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. AT&T now accounts for 43% of connected devices in the US (w/ cellular subscription of some sort).
• Overall, AT&T has 43% of the connected device share of the market. The connected device segment growth slowed down to 8% Q/Q and is still up 32% Y/Y.
• Sprint added more than a million subscriptions while T-Mobile added 126k.

Applications and Services

• After unseating Philippines as the king of TXT messaging last quarter, US TXT messaging continues to grow albeit at a slower pace. Philippines is seeing a sharp decline in per user messaging due to IP messaging. Some of the European operators are also experiencing the pain of declining SMS usage. As expected, this transition will continue around the world at different rates. In the US, while the change is underway, we don’t expect any dramatic declines like the Philippines market in the near-term.
• The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education.
• Q3 2011 again saw tremendous activity in the mobile commerce and payments space with lot of announcements from the operators, Internet players, and startups as well as the retailers and the ecommerce players. All are vying for a piece of the mobile wallet. Much more to come in the next 12 months.

Handsets

• Smartphones continued to be sold at a brisk pace accounting for 57% of the devices sold in Q3 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in revenue and mindshare.
• Nokia’s position in the market improved slightly with the launch of WP7 devices. While it is fairly clear that Windows will acquire the #3 spot behind iOS and Android, the journey to a substantial and competitive market share is still ways off.
• As predicted in the last update, Samsung overtook Apple in smartphone sales and is unlikely to relinquish the title despite a blockbuster iPhone 4S launch in Q4.
• 37% of all smartphones sold globally in Q3 were sold in the US making it the most attractive market for the OEMs.
• Smartphones now account for over 80% revenue of all phones sold in the US.
• In the vertical vs. horizontal platform battle, the ecosystem is shifting towards horizontal domination in the near-term (units sold) while a majority of the profits reside in the vertical column.
• 87% of the tablets use WiFi only (some have inactivated cellular chipset) meaning the operator channel is not a necessary distribution channel. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category. As expected, Verizon announced family data plans for 2012. Other operators will quickly follow or may even preempt Verizon.
• Verizon added another 1.4M LTE subscribers making it the leading LTE operator in the world. AT&T’s LTE plans are gathering steam and Sprint plans to offer LTE in 2012.
• iPhone finally arrived at Sprint. Sales of iPhone 4S have been brisk which is likely to make it the top selling device for the most important quarter of the year.

Mobile Data Growth

• While the spectrum debate rages on, in addition to the network and backhaul upgrades, policy management and data offload have emerged as top two solutions that operators deploying around the world. Signaling management solutions like Diameter routing are also getting good traction. However, a long-term video solution is still elusive. As we have been saying in our Yottabyte series of research papers, a comprehensive solution strategy is needed to effectively manage margins/bit.
• We will have the 3^rd edition of our “Managing Growth and Profits in the Yottabyte Era”research out early next year.

Global Update

• Race to a billion – India’s net-addition rate declined significantly in Q3 2011 while China kept its current pace. We expect that China will be the first country to exceed 1 Billion subscriptions by mid-2012. For India, the event will now occur in 2013.
• For more details, please see our Global Mobile Wireless Market Update released in July 2011.

Mobile Future Forward

Our annual mobile thought-leadership summit - Mobile Future Forward was a grand success. Our thanks to all those who attended as well as to the speakers, sponsors, and well-wishers for making it happen. Planning for 2012 summit are underway and we will keep you posted as plans develop.

More information at http://www.mobilefutureforward.com

Mobile Predictions Survey 2012

As is the tradition, we are running our annual Mobile Predictions Survey for 2012. Will appreciate your input in understanding the trends and news stories that will make 2012 another big year in mobile. Winners of the survey get our fabulous limited edition Mobile Future Forward 2011 book that contains 19 essays from the global leaders in the mobile industry. (Mobile Predictions Survey Results for 2011 here)

Your feedback is always welcome.

Thanks.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2012. The next Global Wireless Data Market update will be issued in Apr 2012.

Disclaimer: Some of the companies mentioned in this paper are our clients.

Mobile in 2012

2011 has been an incredible year in the mobile industry. The progress we have made has been staggering. There have been several industry shaping events throughout the year most notably the passing of the godfather of the digital age – Steve Jobs. While the economy is shaking other industries in their boots, mobile esp. in the north American market has continued its forward march with incredible fervor. This sets up our next and year-ending Mobile Breakfast Series nicely where we take the stock of the current year and look forward to the next one. We will anticipate and debate the trends, the players, and the shifts of the coming year. Our final event of the year will be on Dec 14^th, and you don’t want to miss it as we will have some in-depth discussion that will help you prepare for 2012.

Our distinguished guests are:

Mark Anderson, CEO, Strategic News Service. SNS was the first subscription-based newsletter on the Internet, and is read by Bill Gates, Michael Dell, Mark Hurd, and industry leaders and investors in computing and communications worldwide. Mark is the founding chair of the Future in Review® (FiRe) Conference, as well as of SNS Project Inkwell, the first global consortium to address technology design changes for one-to-one computing in classrooms. He is the founder of two software companies, a hedge fund, and the Washington Technology Industry Association “Fast Pitch” investment forum, Washington’s premier technology investment conference. Best known for his accurate forecasts of important technology market shifts, Mark was the first to predict the global liquidity collapse, on TV on CNBC Europe, in March 2007, in London. He correctly predicted Steve Jobs’ return to Apple before Steve was aware of it, as well as the future popularity of the “CarryAlong” format, now the fastest-growing computer category, represented by iPads and Netbooks.

Satya Mallya, Director of Mobile, Orange. He and his group is responsible for strategy and innovation in  mobile, roadmapping products, technology, terminals, personalization. His team has created and delivered innovative products to the group ranging from Peekapp – the open mobile application directory, Bubbletop the personalization and widget framework, mobile assistant, mobile recommendation and commerce applications. Satya joined Orange Labs as an Architect and has over 18 years of experience in managing and developing products for telecommunications, enterprise and internet applications. Prior to joining Orange, Satya held various engineering and management positions at Bell labs(now Lucent), Octel communications and Aspect Software. Prior to Orange, Satya was responsible for engineering at two startups - Caritasoft – a marketing automation startup and HumanConnect – a Sales Force acceleration startup.

Laura Marriott, CEO, Neomedia Ms. Marriott has been Chief Executive Officer (“CEO”) and Board Chairperson (acting) since October 2010. Prior to this she served as NeoMedia’s Chief Marketing Officer and has been an active member of the NeoMedia Board of Directors since January 2009. Before joining NeoMedia, Ms. Marriott ran her own mobile consultancy helping companies engage the mobile channel in their day to day business. Ms. Marriott has also served as President of the Mobile Marketing Association (“MMA”) from 2005 - 2009 and, earlier, as Director of Marketing for Intrado, Inc. During her tenure at the MMA, the organization’s membership experienced substantial growth, established global headquarters and regional chapters throughout the world, and developed guidelines for the industry. Named one of the industry’s Mobile Women to Watch 2010 by Mobile Marketer, Top 50 US Executives by Mobile Entertainment and Top 10 Women in Wireless by FierceMarkets, Marriott is highly regarded for her global voice and expertise on mobile marketing. Marriott is published in industry publications and quoted in broadcast, print, and radio world-wide.

Bring Fling, CEO, pinchZoom Brian Fling is the Founder and Executive Creative Director of pinch/zoom—a mobile design agency based in Seattle. Brian is the author of O’Reilly Media’s Mobile Design and Development (http://oreilly.com/catalog/9780596155445/) and an authority in the field of  in mobile user experience. He has recently worked with some of the biggest companies in the world—like The New York Times, HSBC, ADP, BBC, Best Buy, PayPal, Delta and eHarmony—to design and build amazing mobile experiences.

Jay Emmet, GM, OpenMarket Jay currently serves as Senior Vice President of Amdocs and General Manager of OpenMarket™, the largest mobile payments and messaging processor in the U.S. and UK. Prior to joining OpenMarket, Jay was President-Americas at mBlox where he led the successful market launch of premium SMS services into the US consumer markets. Jay was previously Senior Vice President of Operations for ATG, and previous to that he was Vice President of Sales and Marketing at New Edge Networks. Jay has an MBA from American University and a BA from St. Anselm College.

As usual, the discussion will be from 8:30-10:00am. Registration and breakfast will begin at 7:30am and there will be time for networking after the panel as well.

Registration - http://mobilebreakfastseries.com/register.htm

Where – Columbia Tower Club

When – Dec 14^th, 7:30-11am

This Mobile Breakfast Series Event has been made possible by the generous support of Amdocs.

Hope you can join us and I look forward to seeing you in a few weeks.

Our distinguished guests are:

Mark Anderson, CEO, Strategic News Service. SNS was the first subscription-based newsletter on the Internet, and is read by Bill Gates, Michael Dell, Mark Hurd, and industry leaders and investors in computing and communications worldwide. Mark is the founding chair of the Future in Review® (FiRe) Conference, as well as of SNS Project Inkwell, the first global consortium to address technology design changes for one-to-one computing in classrooms. He is the founder of two software companies, a hedge fund, and the Washington Technology Industry Association “Fast Pitch” investment forum, Washington’s premier technology investment conference. Best known for his accurate forecasts of important technology market shifts, Mark was the first to predict the global liquidity collapse, on TV on CNBC Europe, in March 2007, in London. He correctly predicted Steve Jobs’ return to Apple before Steve was aware of it, as well as the future popularity of the “CarryAlong” format, now the fastest-growing computer category, represented by iPads and Netbooks.

Satya Mallya, Director of Mobile, Orange. He and his group is responsible for strategy and innovation in  mobile, roadmapping products, technology, terminals, personalization. His team has created and delivered innovative products to the group ranging from Peekapp – the open mobile application directory, Bubbletop the personalization and widget framework, mobile assistant, mobile recommendation and commerce applications. Satya joined Orange Labs as an Architect and has over 18 years of experience in managing and developing products for telecommunications, enterprise and internet applications. Prior to joining Orange, Satya held various engineering and management positions at Bell labs(now Lucent), Octel communications and Aspect Software. Prior to Orange, Satya was responsible for engineering at two startups - Caritasoft – a marketing automation startup and HumanConnect – a Sales Force acceleration startup.

As usual, the discussion will be from 8:30-10:00am. Registration and breakfast will begin at 7:30am and there will be time for networking after the panel as well.

Registration - http://mobilebreakfastseries.com/register.htm

Where – Columbia Tower Club

When – Dec 14^th, 7:30-11am

Hope you can join us and I look forward to seeing you in a few weeks.

MOBILE FIRESIDE CHAT
Global mobility now translates to an $800 billion a year industry and the opportunities are everywhere. Connected devices led by smartphones and tablets application stores featuring hundreds of thousands of applications, cloud-based services and the advent of the mobile web have resulted in explosive industry wide growth. TechNW’s mobile segment delivers the opportunity to hear from leading executives across the spectrum of the industry, from the big players - major carrier and OS platform developers - to venture backed application and analytics providers. Register for TechNW and guarantee your spot at Washington’s most influential tech event.

Moderator
Chetan Sharma, President, Chetan Sharma Consulting

Panel
Bobby Morrison, Regional President, Verizon Wireless

MOBILE

Moderator
Chetan Sharma, President, Chetan Sharma Consulting

Panel
Adriana Neagu, CEO/Co-founder, Formotus
Bryan Trussel, CEO/CoFounder, Glympse
Lou Fasulo, COO, Z2Live
Michael "Luni" Libes, Chief Research Officer/Founder, Mobile Intelligence Solutions
Mike McSherry, CEO, Swype

You changed the world. May you RIP.

As has become the tradition, we published our Mobile Future Forward Book for 2011.

Some of MFF speakers have put their thoughts and ideas on paper that has resulted in this book. We are very grateful to the authors who carved out time from their busy schedules to pen some really insightful commentary on how they see the mobile industry evolve both holistically and in the various important segments of the ecosystem. While the views are quite diverse and bring together perspectives from different angles, everyone agrees, the next decade will be one heck of a time period for innovation.

Our thanks to Steve Mollenkopf, Danny Bowman, Frank Meehan, Subba Rao, Manoj Leelanivas, Steve Elfman, William Hsu, Braxton Woodham, Sanjiv Ahuja, Stephen Bye, Ken Denman, Ramneek Bhasin, Abhi Ingle , Erik Moreno, Carlos Domingo, Biju Nair, Dale Nitschke , and their respective organizations for working with us on an extremely tight timeline.

The thought pieces in this book are:

1. How Mobile Will Change The Way We Spend – Chetan Sharma, President, Chetan Sharma Consulting

2. Smart Integration for Mobile – Steve Mollenkopf, Executive Vice President and Group President. Qualcomm Inc.

3. The Mobile Cloud Connected Enterprise – Abhi Ingle, VP, Advanced Mobility Solutions, AT&T

4. Buying a Mobile Device in 2014 – Frank Meehan, CEO, INQMobile

5. A Conversation with Steve Elfman – President, Sprint Nextel

6. Broadband for All – Sanjiv Ahuja, CEO, LightSquared

7. The Case for Building a Mobile Broadcast Content Delivery Network – The Critical Piece to Fulfilling Mobile Data Demands of the Future – Erik Moreno, SVP, FOX Network

8. Connected Devices – Redefining the Channel – Biju Nair, VP and GM, Connected Devices, Synchronoss Technologies

9. How Mobile Can Turn Retailers Into Media Companies – Dale Nitschke, CEO, Ovative Group

10. Implications of a Connected Society – Danny Bowman, President, Sprint Nextel

11. The Future of the Personal Information Economy: Enabling Success Across the Mobile Ecosystem – Ken Denman, CEO, Openwave

12. The Future of (Mobile) Communications – Carlos Domingo, CEO, Telefonica I&D

13. Mobile and Health Possibilities – Subba Rao, CEO, Razi Health

14. Surviving and Thriving in the Age of Mobile Internet – An MNO Game Plan – Manoj Leelanivas, SVP and GM, Juniper Networks

15. T-Commerce – Carving Out and Extending E-Commerce – Ramneek Bhasin, SVP and GM, TheFind

16. Is Mobile Local Advertising Finally Poised to Take Off? – William Hsu, SVP and CPO, AT&T Interactive

17. Big Data and Mobile – Braxton Woodham, Head of Engineering, AVOS

18. Wireless Competition and Innovation – Stephen Bye, CTO, Sprint Nextel

19. Competition and the Evolution of Mobile Markets – Chetan Sharma, President, Chetan Sharma Consulting

These brilliant essays delve into all facets of the mobile economy from the chipsets to the applications, from new monetization strategies to innovative business models, from supply-chain dynamics to spectrum issues, from competitiveness to collaboration, from cloud computing to connected devices, and from data analytics to connecting with the consumers, and much more. The authors are executives who are deeply engaged in accelerating the evolution of the mobile industry, their insights will give you practical advice on how to apply knowledge to your own businesses over the course of this decade.

The book was produced in record time but it was an exhilarating ride. Thanks to all the authors and our publishing team for making this happen.

http://www.chetansharma.com/connecteddevices.htm

Paper is sponsored by Synchronoss Technologies

Mobile industry is the most dynamic global industry today. The connected mobile universe touches more than 4.5 billion consumers on the planet and these devices have effectively become an integral part of our daily lives. The pace of innovation and product introduction has also accelerated. The lifecycle of mobile network technologies, devices, applications is shrinking rapidly. While the 1G cycle lasted almost 20 years, the 2G cycle shrank to approximately 15 years. Though many countries are still launching 3G, the expected span for 3G in the US is likely to be 10 years. Similarly, on the device front, the average replacement cycles have decreased from over 24 months to less than 12 months in many mobile markets and demographic segments.

Mobility is also getting ingrained in the everyday objects, which make up for a fundamental reassessment of how things are done across industries in almost every region of the world. It is not just the phones and the data cards that are being enabled by the broadband connectivity but also the everyday electronic devices such as the tablets, eReaders, automobiles, picture frames, and cameras.

It is fairly apparent that mobile data is driving the growth in most developed nations. While voice is a stronger component in the developing nations today, it is the demand for mobile data and the lure of data revenues that is even forcing countries like China and India to embrace 4G at a much faster pace than they did 3G. The impact of data services is reflected in the operator financials. In Japan, Softbank became the first major operator to have more revenues come from data than voice. Others are following. In the US, over 37% of the revenues are coming from data services and the data revenues will account for over 50% of the revenues by early 2013.

The changing dynamics of the industry poses some serious questions about the supply-chain, product and service introduction cycles for the operators and the OEMs, and the management of the cost structure and margins of the business. If these elements are not effectively managed, both the competitiveness and the ROI of the products will be severely impacted.  Solutions to these problems must be repeatable, future-proof and –upgradeable, and cost effective, else the solutions won’t scale at the pace needed to manage the growth.

Participants in the ecosystem must identify cost reduction opportunities and streamline operations to take out limitations driven by legacy and drive convenience and seamless user experience for the consumer. Only then can the product introductions be sped up and the desire to maximize profits come to fruition. In this paper, we look at the issues and opportunities around connected devices and the solutions and strategies that will make the ecosystem more vibrant, scalable and sustainable.

Download the paper (1MB)

Of course, we will be discussing this topic in great detail at the Mobile Future Forward summit next week where the central theme is “Connected Universe. Unlimited Opportunities” I will be interviewing Glenn Lurie, President AT&T and Danny Bowman, President, Sprint on this very subject.

Your feedback is always welcome.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this paper are our clients.

The article below.

AT&T-Verizon-T Mobile Sets $100 Million for Google Fight: Tech

August 29, 2011, 12:27 AM EDT

By Olga Kharif

Aug. 29 (Bloomberg) — Verizon Wireless, AT&T Inc. and T- Mobile USA plan to invest more than $100 million in their joint venture that lets consumers pay for goods with mobile phones, people with knowledge of the project said.

The investment sets up a showdown between the venture, known as Isis, and rivals like a mobile-payment service from Google Inc. The amount of funding depends on how successful Isis is at attracting banks and merchants, said one of the people, who asked not to be identified because the financing is private.

The carriers have created the alliance to grab a piece of the market for mobile commerce, which lets consumers buy things by tapping devices against a reader at checkout. The market may reach $670 billion by 2015, Juniper Research says. The carriers may invest hundreds of millions of dollars in the venture if it gains followers, one person said, helping it catch up with Google, which unveiled its own mobile-wallet service in May.

“Over the long haul, operators have to create new businesses that derive value from more than access,” Chetan Sharma, an independent wireless analyst in Issaquah, Washington, said in an interview. “It’s a given that people are going to be transacting more over cell phones. It could open a potential new revenue stream for them.”

Worldwide mobile payments will generate $240 billion this year, growing two to three times that amount within the next five years, according to consulting firm Juniper Research.

Coupon Service

Formed last year, Isis also would let consumers receive and redeem coupons via their mobile devices — in addition to making payments. The service, which will debut in several cities next year, will make money by charging marketers a fee for sending offers to consumers’ phones.

“Isis remains on track to launch in key markets, including Salt Lake City and Austin, in early- to mid-2012,” Jaymee Johnson, head of marketing for Isis, said in a statement. He declined to comment on funding.

Mark Siegel, an AT&T spokesman, also declined to comment, as did T-Mobile’s Hernan Daguerre. The two companies are poised to merge early next year, assuming AT&T’s $39 billion bid passes regulatory scrutiny. Albert Aydin, a Verizon Wireless spokesman, didn’t return a request for comment on Isis’s funding.

Isis also has built ties with the financial industry. It has partnerships with Visa Inc., MasterCard Inc., Discover Financial Services and American Express Co.

Chasing Google

The venture’s carrier owners may decide to increase the pace of the service’s deployment to compete with rival mobile- payment efforts, one of the people said. Google is equipping merchant cash registers to accept its Google Wallet service.

Visa, which runs the world’s largest credit-card network, is hedging its bets. In addition to supporting Isis, it also is working on its own mobile-payment service. And it recently introduced incentives to encourage U.S. merchants to adopt new credit-payment terminals able to accept mobile payments.

Isis aims to get ahead of its rivals by relying on its carrier partners’ existing distribution network and customer relationships. Phones set up for Isis service are expected to be available at carrier stores in the trial cities.

“We have yet to announce our national rollout plans,” Isis’s Johnson said.

The carriers could potentially preinstall Isis software onto their phones, making it easier to use. They also may push handset manufacturers to adopt Isis software.

Samsung Electronics Co. and Research In Motion Ltd. are rolling out new phones that can tap on card-payment terminals at cash registers to make mobile payments. By 2014, at least one in five smartphones globally will rely on a technology called near field communications to offer mobile-payment functions, according to Juniper Research.

http://www.mobilefutureforward.com/agenda.html

Mobile Commerce & Payments

Mobile is fundamentally reshaping how consumers spend. Mobile not only influences purchase behavior but also all moments of truth. Mobile is thus helping close the nirvana gap for brands and advertisers who seek to connect advertising to actual transactions. All ecommerce will eventually be mobile. How are the various players preparing for the new world of mobile commerce and payments? NFC has been around for some time but will it really help in moving the money around? Will the killer NFC application be commerce, payments, advertising, loyalty programs, or something else? How do the mobile technologies influence the instore experience? The panel will chaff through the hype and noise in the segment to discuss where the value is, who benefits, who wins, and how long before mobile becomes central to the multi-trillion dollar global spend?

David Messenger, EVP and Head of Online/Mobile, American Express Company

Gibu Thomas, SVP – Mobile/Online, WalMart

Dale Nitschke, former President, Target

Peter Ewens, Chief Strategy Officer, T-Mobile US

Jay Emmet, GM, OpenMarket, SVP, Amdocs

Bob Egan, Managing Partner, MGI Research (moderator)

The worlds of social, location, gaming, and commerce are colliding to create enormous opportunities that impact devices, software, applications, services, cloud, interface design, advertising, monetization, and consumer expectations. How are entrepreneurs taking advantage of the social and interest graphs, open APIs, fast networks and processors, and different input modalities? Meet the innovators who are creating tremendous value and are at the epicenter of this evolving trend.

Will Hsu, Chief Product Officer, AT&T Interactive

Naoki Aoyagi, CEO, GREE USA

Bob Borchers, Partner, Opus Capital (moderator)

Rob Glaser, Chairman, Real Networks

Wibe Wagemans, Head of Advertising and Analytics, Rovio (Angry Birds)

Jana Messerschmidt, Sr. Director, Twitter

http://www.chetansharma.com/usmarketupdateq22011.htm

Download PDF (32 pages, 2 MB)

US Mobile Data Market Update Q1 2011

Summary

If Confucius was alive, he would have said, “We live in interesting times.” 2011 is proving to be the blockbuster deal year. After Microsoft/Nokia, AT&T/T-Mobile, Microsoft/Skype, Google made the $4*π billion play for Motorola and raised the stakes in the mobile ecosystem warfare. The ecosystem has entered into a phase that Sun Tzu and Chanakya would have loved to operate in.

In other news, the US wireless data market grew 5% Q/Q and 22% Y/Y to reach $16.2B in mobile data service revenues in Q2 2011 and is on course to increase Y/Y by 22% to $67B in 2011.

US unseated Philippines as the king of TXT messaging with almost 664 messages/sub/month. Philippines is seeing a sharp decline in per user messaging thanks to Facebook and app messaging.

Apple overtook Nokia as the dominant smartphone OEM though Samsung is right behind and is likely to overtake Apple later this year. However, Apple will continue to dominate profit share for the foreseeable future.

Smartphones continued to be sold at a brisk pace accounting for 55% of the devices sold in Q2 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare. The featurephone as a device species is on the verge of extinction. By Christmas, 90% of the US postpaid device sales could be smartphones.

Platform Moves

I am a Platform, therefore I am. Everything and everyone wants to be a platform that developers can build upon. The big 4 – Apple, Google, Facebook, and Amazon are having good success with frequent upgrades and rollouts. Consumers gravitate towards ecOSystems and the richness of the product offerings not specific OSes. OS is just a means to an end. However, the more developers you get excited about the platform, the more the ecosystem thrives and it becomes a virtuous circle. Companies left without the dancing partners need to ensure that they are not the one left standing when the music stops.

While a lot of attention has been focused on Apple and Google skirmishes, Amazon has been quietly tinkering with some interesting products – advertising enabled Kindle, the upcoming tablets and handsets, Android based appstores, mobile payments, distribution giant, cloud, and so on and so forth. Facebook with its nearly 800M friends can unleash several “billion dollar” features that can shake up different mobile microcosms.

In the meantime, Microsoft is trying to find a way to get back into the mobile market. Microsoft’s Xbox franchise gives it something unique and compelling. Their success might depend on how well they are able to integrate and tell a compelling story to the consumers. The upcoming Christmas quarter will be a critical test. RIM and HP don’t have much of an ecosystem to matter in the larger scheme of things. They can be successful in their own ways but attaining a leadership position remains significantly challenging.

AT&T/T-Mobile merger

AT&T’s proposed merger of T-Mobile continued to keep the regulators busy for the quarter. Earlier this year, we published a first of its kind in-depth study on competition in mobile markets -“Competition and the Evolution of Mobile Markets - A Study of Competition in Global Mobile Markets”. The paper presents analysis and an in-depth analytical framework to study the competitive landscape in the global mobile markets. Our research shows that an effective equilibrium point for the top three market share in a given country to be around 46%:29%:18% respectively. We expect that once all is said and done, we will end up in the vicinity of this equation.

Patent Warfare

On the eve of Android launch, I mentioned to one of the journalist to watch for some IP fireworks in about 3 years. For those of us who have been deeply involved in the mobile IP space, the IP events of 2011 have been largely predictable though the valuations have gone through the roof.

Over the last 15 years, I have seen patents and IP in the mobile space from all angles from authoring patents to testifying in ITC cases and pretty much everything in between. In the last six months, patents have become an essential tool for competitive strategy in the mobile device space. See our analysis on the major players with the number of granted patents in Europe and US (slide 13).

To paraphrase the oracle of Omaha, “Only when the litigation tide comes in do you discover who’s been swimming without protection.”

Mobile is changing the way we spend

It is very clear that mobile will be at the center of human evolution for years to come. Mobile collapses time and distance and as such impacts every facet of our lives. While we have come to know the mobile phone as a communications device, their role in our daily lives has been expanding. From checking emails, paying for tickets, sending money transfers, taking pictures of your kids, watching soccer World Cup live, checking commodity pricing, to emergency response to mHealth (mobile Health), mobile devices have become an essential tool to help us navigate our day.

Mobile also plays a key role in how we go about the most basic transaction in a given day that keeps the economy humming – spend. We discussed this and more in the paper “How Mobile Will Change The Way We Spend”  that was released earlier this month.

What to expect in the coming months?

All this has setup an absolutely fascinating rest of the year in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. We are likely to see a few more blockbuster marriage proposals before the year is out.

We are going to be discussing the ins and outs of how the industry is going to evolve in the next decade in our Sept 12^th mobile thought leadership summit – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what’s next.

Hope you can join us.

As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.

Against this backdrop, the analysis of the Q2 2011 US wireless data market is:

Service Revenues

• The US Wireless data service revenues grew 5% Q/Q and 22% Y/Y to $16.2B in Q2 2011. The mobile data services revenues for the US market are on track to reach $67B in 2011.
• Verizon and AT&T had a good mobile data quarter accounting for 77% of the increase in data revenues in Q2 2011.
• For the quarter, AT&T and Verizon accounted for 69% of the market data services revenues and 62% of the subscription base.
• Verizon maintained its #1 ranking just edging past NTT DoCoMo who came in at number two with $5.77B in data revenues for the quarter. AT&T maintained its #3 position with $5.4B in data revenues. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for Q2 2011. The proposed merger of AT&T and T-Mobile will make AT&T #1 by a distance and place 20% of the global mobile data revenues in the hands of the top two US operators. AT&T and Verizon will become the #1 and #2 players respectively.

ARPU

• The Overall ARPU increased by $0.41. Average voice ARPU declined by $0.48 while the average data ARPU grew by $0.89 or 5% Q/Q.
• The average industry percentage contribution of data to overall ARPU was 36.3% in Q2 2011 and is likely to touch 40% by year’s end. Verizon is likely to be the first to eclipse the 40% mark with AT&T a close second. (NTT DoCoMo became the second major operator to go past the 50% mark this quarter (if we don’t include Philippines) and Japan as a market follows Philippines in going past the 50% mark).
• Verizon and Sprint were neck-and-neck in data ARPU followed by AT&T. In terms of % contribution, all the top three operators exceeded the 35% mark. T-Mobile ended the quarter with almost 30% of its revenue coming from the data services.
• We expect data revenues to exceed voice revenues in the US market in early 2013.

Subscribers

• Helped by the growth in connected devices, the overall net-adds increased by 4.4M with Verizon accounting for almost 50% of the growth.
• For the seventh straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. AT&T now accounts for 43% of connected devices in the US (w/ cellular subscription of some sort).
• Overall, AT&T has 43% of the connected device share of the market. The connected device segment growth slowed down to 3% Q/Q but is still up 37% Y/Y.
• Sprint continued on its comeback trail by adding more than a million subscriptions for the third straight quarter, first time it has done it since Q2 2005.
• T-Mobile however continues to be sandwiched between the top three and the next three and hasn’t been able to add postpaid subs for five straight quarters. The net-adds declined for third straight quarter.

Applications and Services

• US unseated Philippines as the king of TXT messaging with almost 664 messages/sub/month compared to Philippines which is seeing a sharp decline in per user messaging due to IP messaging. Some of the European operators are also experiencing the pain of declining SMS usage.

• While the percentage share of the data revenues is declining for messaging, the revenue growth stays strong with almost $5B in revenues.

• The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education.
• Q2 2011 also saw tremendous activity in the mobile commerce and payments space with lot of announcements from the operators, Internet players, and startups as well as the retailers and the ecommerce players. All are vying for a piece of the mobile wallet. Much more to come in the next 12 months.

Handsets

• Smartphones continued to be sold at a brisk pace accounting for 55% of the devices sold in Q2 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare.
• For a first time in recent memory, Nokia sold less than 100M devices in a quarter and its marketshare shrank to 22% from a once dominant position of almost 40%.
• Apple unseated Nokia as the king of the smartphone hill but Samsung is right behind and is likely to overtake Apple later this year.
• 35% of all smartphones being sold globally are being sold in the US.
• Last quarter, smartphones sales exceeded the 50% mark. The % share jumped to 55% in Q2 2011. Smartphones now account for 80% revenue of all phones sold in the US.
• In the vertical vs. horizontal platform battle, the ecosystem is shifting towards horizontal domination in the near-term (units sold) while a majority of the profits reside in the vertical column.
• 85% of the tablets use WiFi only (some have inactivated cellular chipset) meaning the operator channel is not a necessary distribution channel. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category.
• While the definition of 4G stays muddled, Sprint added 1.7M WiMax subs and Verizon incremented their LTE count by 1.2M.

Mobile Data Growth

• The mobile data consumption continues unabated. We expect per MB usage in the US to reach 675 MB by the end of 2011 just behind Sweden which is likely to end up at 760 MB.

• While the spectrum debate rages on, in addition to the network and backhaul upgrades, policy management and data offload have emerged as top two solutions that operators deploying around the world. Signaling management solutions like Diameter routing are also getting good traction. However, a long-term video solution is still elusive. As we have been saying in our Yottabyte series of research papers, a comprehensive solution strategy is needed to effectively manage margins/bit.

• We will have the 3^rd edition of our “Managing Growth and Profits in the Yottabyte Era”research out later this year. We will also be discussing this subject in great detail at our Mobile Future Forward summit with some of the most influential voices in the space.

Global Update

• Race to a billion - India went past 850M in Q2 2011 subs and China went past 900M. By mid 2012 both India and China will have more than a billion subscriptions.

• China Mobile crossed the 600M subscription mark however its 3G introduction has had a tepid response thus and its 4G strategy remains in flux.

• For more details, please see our Global Mobile Wireless Market Update released in July 2011.

Mobile Future Forward

We will be discussing the global mobile ecosystem – the challenges and the opportunities at our annual mobile thought-leadership summit – Mobile Future Forward - brought to you in partnership with our terrific partners – Qualcomm, Millennial Media, Real Networks, AT&T Interactive, Synchronoss Technologies, OpenMarket, Ericsson, and Openwave. Hope to see you in Seattle on Sept 12th.

Some of the distinguished guests include:

Abhi Ingle, VP, AT&T; Biju Nair, Chief Strategy Officer, Synchronoss Technologies; Bob Borchers, Partner, Opus Capital; Bobby Morrison, President – PNW, Verizon Wireless; Braxton Woodham, Head of Product Development, AVOS; Danny Bowman, President, Sprint; David Messenger, EVP, Head of Online/Mobile, American Express; Gibu Thomas, SVP – Mobile Walmart; Erik Moremo, SVP, FOX; Glenn Lurie, President, Emerging Devices, Resale & Partnerships, AT&T Mobility; Hank Skorny, CSO, Real Networks; Jana Messerschmidt, Sr. Director, Twitter; Jay Emmet, GM, OpenMarket; Jason MacKenzie, President, Global Sales and Marketing, HTC; Jerry Batt, CIO, PulteGroup; Ken Denman, CEO, Openwave; Ken Wirth, President, Alcatel-Lucent Wireless; Kris Rinne, SVP - Networks/Architecture, AT&T; Mark Rolston, Chief Creative Officer, Frog Design; Manoj Leelanivas, EVP & GM, Juniper Networks; Michael Wolf, VP, GigaOM; Mikael Back, VP – Products, Ericsson; Naoki Aoyagi, CEO, GREE USA; Paul Palmieri, CEO, Millennial Media; Rob Glaser, Partner, Accel; Sanjiv Ahuja, CEO, LightSquared; Stephen Bye, CTO, Sprint; Steve Mollenkopf, EVP/Group President, Qualcomm; Suja Chandrasekaran, CIO, Timberland; Will Hsu, CPO, AT&T Interactive.

More information at http://www.mobilefutureforward.com

Your feedback is always welcome.

Thanks.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Nov 2011. The next Global Wireless Data Market update will be issued in Apr 2012.

Disclaimer: Some of the companies mentioned in this paper are our clients.

As Networks Speed Up, Data Hits a Wall

By JENNA WORTHAM

The newest smartphones are intended to run on speedy 4G networks that allow people to effortlessly stream music, watch Netflix movies and tune in live to a Mets game, wherever they are.

But there’s a catch, of course.

Cellphone plans that let people gobble up data as if they were at an all-you-can eat buffet are disappearing, just as a new crop of data-gobbling Internet services from Netflix, Spotify, Amazon, Apple and the like are hitting the market or catching on with wide audiences.

These services use far more data than simply checking e-mail or browsing the Web, so their heaviest users may find themselves running over their plan’s monthly allotment and paying extra.

The wireless carriers say their tighter limits will affect only a small percentage of customers. And they say they are simply trying to get ahead of an exploding appetite for data and avoid problems with overburdened networks.

Mark Siegel, a spokesman for AT&T, said that if current trends continued, the company’s network would carry more data in the first two months of 2015 than in all of 2010. He described the pricing issue as a “balancing act,” adding: “The tiered data plans will meet the needs of the overwhelming majority of consumers. A lot of people think they’re heavy users, but they’re not.”

But analysts say that inevitably more people will find themselves in the “heavy user” category, particularly as more of them trade in their lower-end phones for smartphones and move to 4G networks.

For most people who use their phones to check e-mail, surf the Web and watch an occasional video, the move toward tiered pricing will not immediately raise their phone bills. Verizon’s monthly plan offering two gigabytes of data for $30, announced last month, costs the same as its old unlimited plan, for example. But even now it doesn’t take much for a media-hungry smartphone user to chew through two gigabytes; watching Netflix video for more than roughly 20 minutes a day will do the trick. And an extra gigabyte will cost Verizon customers an additional $10.

“Over time, as you give people faster devices with faster speeds, it’s going to be a lot easier to hit that two-gig mark,” said Philip Cusick, an analyst with JPMorgan Chase who follows the telecommunications industry.

In addition to worrying about overtaxing their networks, wireless carriers are looking for new ways to make money from mobile data and applications, rather than voice minutes.

Over the last three years, the amount of money consumers spent a month on mobile calling declined to $30 from $40, according to Recon Analytics. During the same period, the average amount spent on data nearly doubled, jumping to $13 from $7.

“We’ve fallen in love with data and the utility that we get from it,” said Roger Entner, an analyst at Recon. “The usage pattern has changed dramatically.”

AT&T and Verizon have both phased out their unlimited data plans in favor of tiered plans. Verizon offers 75-megabyte plans for basic phones, as well as two-, five- and 10-gigabyte plans for smartphones, topping out at $80 a month. Those in the more expensive plans who go over their limit are charged $10 for another gigabyte, as are AT&T customers who exceed the limit on that company’s two-gigabyte plan, which costs $25.

T-Mobile, which AT&T is hoping to acquire, offers tiers from 200 megabytes up to 10 gigabytes. Those on the 200-megabyte plan are charged 10 cents for an extra megabyte. And if those with the upper-tier plans exceed their limits, the company slows their data connections until the next billing period.

Sprint is the last carrier to hold onto its unlimited data plan, but analysts and industry experts say it is unlikely to last.

All of the carriers let customers track their data use through their Web sites and on their phones, and they send alerts when customers are in danger of going over.

Of course, those who want to avoid paying more can simply wait until they are connected to a Wi-Fi network to, say, download high-definition videos, since this will not count against the monthly limit. But that doesn’t help someone who wants to stream movies or music on a long evening commute.

Terry Hartup, 34, who works as a technology consultant in Clearwater, Fla., said he was frustrated that his connection might be slowed if T-Mobile decided he was using too much data.

“These new services are coming out that let us do more, but the pipe is getting smaller and smaller,” he said. “And costing us more.”

Mr. Hartup, who streams audio throughout most of the day on Spotify and Pandora over T-Mobile’s network and Wi-Fi, says he rarely goes over two gigabytes a month. But he worries that new apps and services will make it harder to stay under that cap.

The data caps are very much on the minds of developers of mobile apps and services, who need to think about how they will affect the way people use their phones.

Malthe Sigurdsson, vice president for product design at the Internet music service Rdio, said the company was adapting to the data limits. Rdio includes several features intended to help prevent users from unwittingly churning through their data allowance.

“You can set Rdio to play at a lower quality when using a cellular network, and then decide to use a higher quality when on Wi-Fi,” he said. “We try to help people out so they don’t use up their cap in a few hours of using our service.”

Most people, he said, have adjusted their behavior to stream only when they are on a Wi-Fi network, or make use of a feature that lets them store songs on their phones to play when they are away from Wi-Fi.

Kevin Systrom, one of the founders of Instagram, a popular photo-sharing application for iPhones, said he was concerned that data caps would constrain developers from creating innovative and possibly data-intensive features and services.

“Any low data limits imposed would curb usage of all services,” he said. He called the introduction of data caps “a step backwards for mobile technology.”

Yet AT&T and other carriers, along with some developers, argue that the caps make data use more affordable and improve the performance of the carriers’ networks for all.

The main issue, developers say, is that most people have no idea how much data they are using when watching a YouTube video or sending an e-mail.

“They don’t have an intuitive feel for how much data they’re using,” said Rick Osterloh, vice president for development at Skype. “You can so easily blow through a data plan if you’re watching videos, browsing the Web and making Skype calls.”

Mr. Osterloh said he sympathized with the challenge the carriers face in managing demands. But he is concerned that mobile Skype users who accidentally go over their limits may get upset with the company rather than their carrier.

The wireless carriers, who will increasingly compete with one another for customers, could raise their data caps to best rivals and accommodate customers’ increasing appetites.

During a recent call with investors, Lowell McAdams, Verizon’s newly appointed chief executive, said it was not inconceivable that carriers might once again dangle unlimited data plans to lure subscribers.

“There may be some that hold out longer with unlimited, and I wouldn’t be surprised if unlimited comes back in and out from a promotional perspective,” he said. But he added that the trend toward limits was “inevitable.”

http://www.mobilefutureforward.com/agenda.html

Keynote - Steve Mollenkopf, EVP and Group President, Qualcomm

Recent studies estimate there will be 1 billion smartphones on the global market by 2016. The proliferation of high- performance internet-enabled devices, objects and machines, in conjunction with next-generation LTE networks, clearly shows the mobile industry is on the cusp of enabling a world where virtually all the devices in your life are smart and connected. We are entering an era where smartphones and tablets will truly be the primary means by which we communicate with each other and control the devices around us. Making these connections will open up new opportunities for both the mobile ecosystem and the consumers that fuel it. Qualcomm Executive Vice President and Group President Steve Mollenkopf will address how mobile computing solutions are helping the industry realize a new vision for the mobile user of tomorrow.

You should definitely check it out for yourself - http://www.millennialmedia.com/research/50th-report/

Here are some stats on how things have changed in the last 3 years.

Hope you are having a great summer.

We are only 4 weeks away from the 2^nd Mobile Future Forward Executive Summit so I thought I will provide an update to the agenda and the speakers. We have an incredible line-up of speakers, thinkers and doers. The meeting of the minds will hopefully inspire you, help meet the "key" decision makers in the mobile ecosystem, and learn about the future direction of the mobile industry.

Give us your one day and we will give you the next 5 years in mobile.

Registration and other information at  http://www.mobilefutureforward.com

Please note: Summer Saver is expiring next Friday, Aug 19th, 2011. We are 80% sold out so please register early.

In proud partnership with: AT&T Interactive, Ericsson, Millennial Media, Open Market, Openwave, Qualcomm, Real Networks, and Synchronoss Technologies

We also released our Mobile Future Forward Whitepaper – How Mobile Will Change The Way We Spend. It will be part of the Mobile Future Forward book that will be released on Sept 12^th to the summit attendees. Book contains 19 essays from our illustrious speakers and industry thought-leaders.

We look forward to seeing you on Sept 12^th.

Thanks

Chetan

Agenda subject to change

Register today at http://www.mobilefutureforward.com/register.html

Mobile Future Forward is produced by Chetan Sharma Consulting